Schneiderman Seeks Quick Action To Stop Daily Fantasy Sports Operators
Legal Sports Report

New York AG Files For Injunction To Stop DraftKings, FanDuel From Operating in NY

Schneiderman fantasy sports
New York Attorney General Eric Schneiderman filed for a preliminary injunction against DraftKings and FanDuel in the state supreme court on Tuesday morning.

FanDuel announced soon after that it would be leaving the New York market, at least temporarily.

The action taken by the NY AG against DFS

A press release from Schneiderman’s office said the lawsuit “details alleged violations of law by DraftKings and FanDuel.”

The request for an injunction against DraftKings can be found here; the request against FanDuel is here.

The filings request the following: “The State therefore brings this action to enjoin DraftKings (“the company” is used in the FanDuel filing) from continuing to operate an unlawful gambling business in New York.” The AG alleges violations on three different prongs:

It appears the judge many not rule on the merits of the AG’s preliminary injunction request until an emergency hearing Nov. 25.

FanDuel pulls out of New York

FanDuel announced it would not serve the New York market, starting today:

In FanDuel’s ongoing effort to fight for fantasy users across New York, we filed for a temporary restraining order yesterday that would allow users to keep playing on our site while the legal case was pending. The court did not issue the TRO but set a hearing for November 25th, ensuring that the legal situation will be promptly resolved.

As a result of that decision, we are temporarily suspending entry in paid contests for people located in New York as of 2:30 pm EST today, Tuesday, November 17th. This is in addition to the restrictions on deposits previously implemented. We believe that this restriction is temporary and we hope to be able to offer our paid contests to New Yorkers again very soon.

DraftKings stays in New York, for now

DraftKings offered the following statement after the injunction request was filed:

“We look forward to being afforded a full and fair opportunity to demonstrate why daily fantasy sports are legal under New York State law. We believe the Attorney General’s view of this issue is based on an incomplete understanding of the facts about how our business operates and a fundamental misinterpretation and misapplication of the law.

We remain committed to ensuring that New Yorkers retain the right to continue to play the daily fantasy sports games they love.”

The basics of the NY AG’s case

Schneiderman’s office put forth the framework of its case in the press release, and in two separate “memorandums of law.”

Constitutional issues with operating DFS in NY

Schneiderman that FanDuel and DraftKings operate in violation of the state constitution; he argues DFS falls under “gambling” language by the state’s highest law. The threshold for determining if something is gambling is much lower than in the state penal code, and there is no mention of “games of skill” in the constitution. From the AG’s presser:

The New York State Constitution has prohibited bookmaking and other forms of sports gambling since 1894. Under New York law, a wager constitutes gambling when it depends on either a (1) “future contingent event not under [the bettor’s] control or influence” or (2) “contest of chance.” So-called Daily Fantasy Sports (“DFS”) wagers fit squarely in both these definitions, though by meeting just one of the two definitions DFS would be considered gambling.  DFS is nothing more than a rebranding of sports betting. It is plainly illegal.

DFS can be a skillful game, but still be gambling

Schneiderman uses the constitution as an argument that the amount of skill involved in DFS is irrelevant. From the presser:

Yet FanDuel and DraftKings insist that DFS is not gambling because it involves skill. But this argument fails for two clear reasons. First, this view overlooks the explicit prohibition against wagering on future contingent events, a statutory test that requires no judgment of the relative importance of skill and chance—they are irrelevant to the question. Second, the key factor establishing a game of skill is not the presence of skill, but the absence of a material element of chance. Here, chance plays just as much of a role (if not more) than it does in games like poker and blackjack. A few good players in a poker tournament may rise to the top based on their skill; but the game is still gambling.  So is DFS.

Asserts DraftKings, FanDuel know they are gambling operations

Harkening back to the Nevada AG’s ruling that DFS is gambling under state law, Schneiderman makes the argument that the two operators conduct themselves like gambling sites. Some of the same details used by the Nevada AG are referenced. From the presser:

  • FanDuel and DraftKings’ current denials about DFS constituting gambling are belied by how the sites depicted themselves in the past and how they portray themselves behind closed doors.  FanDuel’s DFS contests were designed by a veteran of the legal online betting industry in the United Kingdom, Nigel Eccles.  The company admitted to an early investor that its target market is male sports fans who “cannot gamble online legally.”
  • DraftKings depicts itself to investors in a similar fashion. For example, in one investor presentation, DraftKings pitched itself to a prospective investor by noting the “Global opportunity for online betting,” pointing to the massive revenue of the “global online poker market,” and making direct comparisons throughout the presentation to poker and sports wagering.
  • The CEO of DraftKings previously spoke openly about DraftKings as a gambling company.  He called DFS a “mash[-]up between poker and fantasy sports,” suggested that DraftKings operates in the “gambling space,” and  described its revenue model as “identical to a casino.”

Specific violations of law that AG is alleging

In his letters to the two sites asking them to cease and desist in New York, Schneiderman already noted which laws he believes FanDuel and DraftKings are violating. The injunction filings went into more detail (links to relevant laws and statutes have been included)

The state constitution

Article I, Section 9 of the New York State Constitution prohibits any lottery or the sale of lottery tickets, pool-selling, book-making, or any other kind of gambling, except lotteries operated by the state, pari-mutuel betting on horse races, and casino gambling at no more than seven facilities. 129. As set forth above, Defendant violates Article I, Section 9 of the New York State Constitution by running a book-making or other kind of gambling business.

Article I, Section 9 of the New York State Constitution

Promoting gambling in the state penal code

Penal Law § 225.10 prohibits any person from promoting gambling in the first degree by knowingly advancing or profiting from unlawful gambling activity by engaging in 25 bookmaking to the extent that he receives or accepts in any one day more than five bets totaling more than five thousand dollars. 134.

As set forth above, defendant violates Penal Law § 225.10 by knowingly advancing and profiting from unlawful gambling activity by receiving and accepting in any one day, and indeed on many days, more than five bets totaling more than five thousand dollars.

Promoting gambling in the first degree

The AG also asserts the sites are in violation of the same portion of the code of “promoting gambling in the second degree.”

Promoting gambling in the second degree

Possession of gambling records in the state penal code

Penal Law § 225.20 prohibits any person from possessing gambling records in the first degree when, with knowledge of the contents thereof, he possesses any writing, paper, instrument or article of a kind commonly used in the operation or promotion of a bookmaking scheme or enterprise, and constituting, reflecting or representing more than five bets totaling more than five thousand dollars.

As set forth above, defendant violates Penal Law § 225.20 by, with knowledge of the contents thereof, possessing any writing, paper, instrument or article of a kind commonly used in the operation or promotion of a bookmaking scheme or enterprise and constituting, reflecting or representing more than five bets totaling more than five thousand dollars.

To wit, Defendant maintains a computer system recording hundreds of thousands of illegal wagers.

Possession of gambling records in the first degree

The AG also asserts the sites are in violation of the same portion of the code of “possession of gambling records in the second degree.”

Possession of gambling records in the second degree

‘Fraudulent conduct’

Executive Law § 63(12) authorizes the Attorney General to bring an action to enjoin repeated or persistent fraudulent conduct.

As set forth above, defendant has engaged in repeated and persistent fraudulent acts by conduct, including but not limited to:

a. Misrepresenting that defendant complies with applicable laws

b. Misrepresenting the likelihood of a casual player will win a jackpot;

c. Misrepresenting the degree of skill implicated in the games;

d. Misrepresenting that defendant’s games are not considered gambling.

Executive Law § 63 (12)

Earlier in the filings, the AG outlines instances where he believes DraftKings’ and FanDuel’s advertising to be misleading.

Violation of “Business Corporate Law”

Defendant has also engaged in repeated and persistent fraudulent acts by conduct, including but not limited to:

a. Misrepresenting that defendant complies with applicable laws

b. Misrepresenting the likelihood of a casual player will win a jackpot;

c. Misrepresenting the degree of skill implicated in the games; and

d. Misrepresenting that defendant’s games are not considered gambling.

As such, defendant has abused its powers contrary to the public policy of the state, warranting annulment of its authority to do business in this state and an injunction against its continued operation of an illegal gambling business.

BCL § 1303

Violations of “General Business Law”

As set forth above, defendant has engaged in deceptive acts and practices in violation of GBL § 349 by conduct, including, but not limited to:

a. Misrepresenting that defendant complies with applicable laws;

b. Misrepresenting that casual player is likely to win a jackpot;

c. Misrepresenting that DFS is a “skill game”; and

d. Misrepresenting that defendant’s games are not considered gambling.

GBL §§ 349

The filing also asserts violation of  GBL §§ 350

Exhibits from the NY AG’s office

Documents are being filed as evidence by the AG’s office, and some are available online (you can view all of them here and here).

Here are some of the most interesting ones, as the NY AG attempts to prove 1. that the two sites actively realize they are knowingly running gambling operations, and 2. that DFS is akin to gambling:

DraftKings poker gambling

Confusion regarding AG’s intentions from DraftKings

The action comes less than 24 hours after a judge denied temporary restraining orders by both DraftKings and FanDuel seeking to block any action by the AG.

After the TROs were dismissed, DraftKings offered a statement to the press that said “the AG assured the Court he will take no action against DraftKings or its business partners before then.”

FanDuel did not make a similar statement regarding the AG’s intentions on Monday night.

Sign Up For The Grove Report – US Online Gambling Industry Insights Delivered To Your Inbox:
Dustin Gouker
- Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner.